(Originally published May 2021)
Effectively managing Microsoft 365 licenses is crucial for maximizing your investment and organizational productivity. Plus, it’s a key component of your overall Microsoft governance strategy. Proper license management ensures compliance and prevents unauthorized access.
Inside this article:
The first step in managing M365 licenses begins with a strategic assessment of your organization’s needs. Understanding the distinct roles within your team and their specific software requirements is not just about allocation—it's about aligning technology with your business goals. For example, some users may need access to advanced features available in higher-tier licenses, while others may only require basic functionality. By analyzing usage patterns and understanding these needs, you can ensure that licenses are allocated appropriately.
Understanding your team's roles and software needs is just the beginning. The deployment of Microsoft 365's Group-based licensing tool is a strategic move that transcends mere convenience. By automating license assignments according to group membership, it ensures seamless access for users as they transition within your organization. This dynamic allocation not only streamlines IT operations but also underpins your strategic goals of maintaining operational agility and optimizing your IT budget by preventing license wastage.
(H3) Analyze your current license situation
Effective Microsoft 365 license allocation isn't merely about numbers—it's about strategic foresight. By meticulously documenting existing licenses and utilization, you can unveil opportunities for license optimization that align with corporate objectives and uncover inefficiencies or gaps.
This process not only identifies inefficiencies but also serves as a critical foundation for a robust IT strategy, preventing over-provisioning, and ensuring that investments directly contribute to operational excellence.
Embracing auto-claim policies to dynamically assign and reallocate unused licenses not only streamlines administration but also ensures that your organization remains agile and ready to allocate resources where they're most needed.
In the Microsoft 365 Admin Center, navigate to Billing > Licenses to see a detailed view of all available licenses. This view provides essential information about the types and quantities of licenses at your disposal.
Use the Reports section to identify unused licenses. This helps in reallocating or canceling unnecessary licenses to save costs. By regularly monitoring license usage, you can ensure that resources are utilized efficiently and cost-effectively.
Depending on organizational policies, the user’s data might be archived, transferred, or deleted. This is critical for maintaining compliance and managing digital footprints within the organization’s IT ecosystem.
Empowering your organization starts with understanding the nuanced landscape of Microsoft 365 licensing options. Each license type unlocks different capabilities (and limitations) directly impacting your team's ability to innovate and execute.
Familiarize yourself with different licensing options to choose the best fit for your organization. More details on Microsoft licensing are available here: Microsoft 365 License Plans and Pricing
Ultimately, this strategic alignment between user needs and licensing ensures that your technological infrastructure is not just a cost center but a pivotal enabler of your business strategy.
Anticipating growth is at the core of strategic planning. As your organization grows, the demand for additional licenses will increase. Selecting a Microsoft 365 licensing model that scales with your organization is crucial for maintaining agility in a competitive landscape.
For businesses poised for growth, having a scalable licensing strategy ensures that you can swiftly adapt to changing needs, embracing new functionalities as your operational demands evolve. For small to medium-sized businesses, simpler licensing models may suffice, but larger organizations might require more complex licensing structures to meet diverse user needs.
This forward-thinking approach not only guarantees that your workforce is perpetually equipped with the right tools but also positions your IT expenditure as an investment in your organization's dynamic growth and innovation capability.
Ensuring compliance and safeguarding security are not just operational necessities but strategic imperatives. Consider any regulatory requirements that might influence how user identities need to be managed and authenticated.
For instance, Microsoft 365’s E5 licenses offer advanced protections and features for data protection, threat protection, and more, that align with stringent regulatory requirements (e.g., GDPR and HIPAA).
Be sure to also stay up-to-date on and compliant with current Microsoft licensing agreements to avoid legal issues and fines.
Quick licensing tip: Each Microsoft 365 license is comprised of a set of service plans, which allows administrators to control access to specific services. Using PowerShell scripts or Microsoft Graph, licenses can be tailored to enable or disable these individual services, aligning with the precise needs of your users and optimizing your license spending.
Adopting a lifecycle management approach to your Microsoft 365 licenses transcends operational efficiency, demonstrating a commitment to sustained excellence and adaptability.
Regularly reviewing, renewing, and adjusting licenses ensures that your organization's technological resources are always aligned with its evolving ambitions. This proactive stance not only optimizes your investment but also signals to your team and your industry your dedication to maintaining a state-of-the-art operational backbone, capable of supporting your organization's strategic initiatives and growth trajectory.
Download the full Microsoft 365 license management checklist
When it comes to Microsoft 365 license administration, the choice of tools can significantly impact your organization's operational efficiency, compliance adherence, and cost optimization.
Among the available options, Microsoft’s built-in features offer robust solutions to streamline operations, ensure compliance, and optimize costs. For bulk editing and assignment, group-based licensing in Entra ID will be the best option, since it offers scalability and flexibility for diverse organizational needs. For one-off license changes, the Microsoft 365 Admin Center stands out for its direct and user-friendly interface.
The Licenses page in the Admin Center allows for straightforward license management, including assignment, unassignment, and monitoring. It’s an essential tool for daily license management tasks and provides a user-friendly interface for administrators.
For instance, if you're adding a new employee to your team, using the Licenses page makes the most sense because it allows for quick assignment of the necessary licenses directly through the interface without dealing with command lines or external tools.
Use It or Lose It: 3 Ways to Remove Licenses from Microsoft 365
The Active Users page provides detailed information about user accounts and their assigned licenses, enabling easy management. This page is useful for tracking individual user license assignments and making necessary adjustments.
Adopting Group-based licensing not only simplifies your IT processes but strategically positions your organization for agile growth and operational efficiency. This approach directly supports cost-savings initiatives by ensuring licenses are dynamically allocated, reducing overspending on unused licenses.
For CIOs and CTOs, this means ensuring that your workforce is always equipped with the exact tools they need, without overburdening the IT team with manual tasks. This agility supports rapid organizational changes and growth, ensuring your technology stack can adapt seamlessly to new business demands. Moreover, it optimizes software expenditure, ensuring financial resources are allocated strategically to drive business value, not wasted on unused licenses.
Advantages of Group-based Licensing include:
Embracing PowerShell for Microsoft 365 license management opens up a world where IT agility directly supports your broader business strategy. With the ability to automate complex licensing tasks, your organization gains the flexibility to quickly adapt to changes—be it in scaling operations, restructuring departments, or deploying new software capabilities. This not only catapults your IT department's efficiency to new heights but also strategically aligns your technology investments with business objectives, ensuring every decision made contributes directly to your bottom line.
Due to the deprecation of the MSOnline and Entra ID modules, it's recommended to use Microsoft Graph SDK cmdlets for managing Microsoft 365 licenses. This approach is particularly beneficial for large-scale operations or organizational restructurings, providing a means to efficiently update user licenses en masse, significantly reducing administrative overhead.
For example, to assign or remove licenses in bulk, which is particularly challenging in larger tenants, scripts using Microsoft Graph API provide a more efficient and future-proof method. Here are examples of such scripts for enabling specific services or removing licenses for a group of users via the Graph API from MVP Vasil Michev:
PowerShell scripts offer powerful automation capabilities for managing licenses, especially useful for bulk operations. PowerShell can automate repetitive tasks, reducing the administrative burden and ensuring consistency in license management.
For example, if you're undergoing a company-wide restructuring that requires bulk updating of M365 user licenses based on new departmental roles, PowerShell scripts can efficiently process these changes in batch mode, saving significant time compared to manually updating each user.
Note: While PowerShell remains a powerful tool for Microsoft 365 license management, Microsoft Graph is emerging as the preferred API for modern management tasks. Microsoft Graph facilitates comprehensive control over Microsoft 365 services, offering extensive capabilities for license management. Consider incorporating Microsoft Graph in your automation strategies to leverage the latest advancements in Microsoft's cloud ecosystem for more efficient license management.
Incorporating third-party management platforms into your Microsoft 365 ecosystem extends beyond mere feature enhancement; it represents a strategic investment in maximizing the ROI of your software portfolio.
For C-suite executives, this means gaining deeper insights into how licenses are utilized across the organization, enabling data-driven decisions that align software spending with actual usage and business needs. It also opens up opportunities for enhanced security and compliance postures, as these platforms often provide sophisticated monitoring and reporting features that can preemptively address potential vulnerabilities or compliance issues.
And, while native Microsoft tools provide a solid foundation for license management, integrating third-party platforms like CoreView or Simeon Cloud can elevate your strategy. These platforms offer enhanced features, such as granular reporting and advanced security measures, not available in native tools.
For example, by leveraging third-party solutions, an organization achieved a 40% improvement in identifying and reallocating unused licenses, significantly boosting their IT budget efficiency. Furthermore, these platforms can provide deeper insights into license utilization, helping to align license spending with actual usage and uncovering opportunities for cost savings and compliance enhancements.
In our recent Microsoft 365 governance and licensing report, 17% of organizations surveyed had more than 10,000 unassigned licenses sitting on the shelf, while 10% had more than 10,000 inactive licenses.
In Microsoft 365 environments, guest users are often able to access shared resources without needing a license assigned from the resource tenant. Typically, guest users should be licensed in their "home" tenant—not your organization's tenant. This helps organizations collaborate with external users (e.g. via Teams or SharePoint) while managing costs effectively.
However, there are scenarios where you might need to assign a license to a guest user, depending on the type of access or services required beyond the standard collaboration tools. For example, if a guest user requires access to premium features that go beyond the default collaboration tools, such as Microsoft Project or certain aspects of Power BI, assigning a license might be necessary.
The capability to assign a license to a guest user allows for greater flexibility but should be used judiciously, considering the additional cost and the precise access needs of the guest.
The primary exception relates to the Monthly Active Users (MAU) consumption model, which provides a cost-effective way to manage access for guest users. More information on this model can be found here: https://learn.microsoft.com/en-us/entra/external-id/external-identities-pricing
Before following these instructions, be sure to review Microsoft’s current licensing guidelines and consult your license agreement.
Group-based licensing in Microsoft 365 simplifies license management, especially for large organizations or those with fluctuating staff levels. Keep in mind that while group-based licensing offers scalability and automation, it does require P1 or P2 licenses.
To implement group-based licensing, you first need to organize your users into groups based on their licensing needs. These groups can be dynamically generated based on user attributes such as department, location, or job function.
Through the Entra ID portal, administrators can then assign the appropriate Microsoft 365 licenses to these groups, ensuring seamless and automated license management.
Here's a more technical guide to setting up group-based licensing:
When using group licensing, keep in mind that leveraging dynamic groups can automate these processes further, where users are added or removed from groups based on attributes like job function, department, or location. And, be aware of any users who may have licenses assigned directly rather than through group membership, as this could affect license availability and compliance.
Harnessing the power of PowerShell scripts for license management aligns with strategic IT goals by significantly reducing manual workload. This automation capability enables your organization to rapidly adjust to changing business needs, fostering an environment of innovation and operational agility.
PowerShell and Microsoft Graph provide powerful capabilities for managing Microsoft 365 licenses. Below are essential cmdlets from the Microsoft Graph SDK, which are currently supported and recommended for managing licenses. It's important to note that while cmdlets from the MSOnline and AzureAD modules have been widely used in the past, they are no longer recommended for new scripts due to their deprecation status.
While the following cmdlets have been instrumental in managing M365 licenses, they come from the MSOnline and AzureAD modules, which Microsoft has marked as deprecated. It's advisable to transition to using Microsoft Graph cmdlets for future-proof scripts and operations.
Microsoft provides powerful tools like Power BI and Excel that can be used in conjunction with reports from the Admin Center to enhance license management. These tools allow for more detailed analysis and visualization of license data, making it easier to identify trends.
Power BI can transform the way you analyze and visualize license data. By importing data from the Microsoft 365 Admin Center into Power BI, you can create custom dashboards that provide real-time insights into license usage, compliance status, and cost data. Power BI's advanced analytics features allow you to identify trends and patterns in license usage, enabling more informed decision-making.
Excel remains a versatile tool for license management. By exporting license usage reports from the Admin Center to Excel, you can leverage its powerful data analysis tools, such as pivot tables and charts, to dissect and understand your license data. Custom reports in Excel can help track specific metrics and KPIs, providing a clear view of license allocation and usage.
Learn the benefits of Microsoft 365 license management.
Adhering to best practices in Microsoft 365 license management not only ensures that your organization remains compliant and secure but also positions your IT infrastructure as a strategic asset that drives business success. Click on one of the licensing best practices below for more detail:
Due to the complex nature of Microsoft 365 licenses, for some organizations license management is a full-time job in itself. Conduct regular audits to keep a precise inventory of all your software licenses, both on-premises and cloud-based. And, keep in mind that getting the right licenses requires balancing considerations that are constantly changing.
Audit licensing every 6-12 months, making note of:
For instance, an audit might reveal that a portion of your workforce using E3 licenses can perform their roles effectively with E1 licenses instead. Making such a switch, depending on the size of this group, could potentially save tens of thousands of dollars annually.
That being said, you’ll also want to pay special attention to these scenarios since they can create security issues for your organization.
Maintaining detailed documentation of usage rights and license restrictions is a cornerstone of strategic IT asset management. This practice ensures audit readiness, supports compliance efforts, and enables organizations to swiftly adapt to changes in licensing terms without disrupting business operations. This includes everything from recording upgrade rights, downgrade rights, geographic restrictions, and any other specific conditions.
Additionally, by keeping abreast of vendor license updates, organizations position themselves to leverage favorable terms, ensuring that their licensing strategy remains aligned with their technological roadmap and business objectives.
Practically, that means maintaining detailed records of purchases, deployments, and usage to ensure you are prepared for any vendor audits, and it includes keeping receipts, contracts, and other proof of license purchases.
Plus, since software vendors frequently update their licensing terms, regularly reviewing and documenting these changes ensures you maintain compliance and adjust management practices accordingly.
Implementing clear license use policies is a strategic initiative that optimizes resource allocation across different user groups within the organization. Define clear policies for license usage to ensure consistent management and compliance, set expectations, and provide guidelines for how licenses should be used within the organization.
For example, consider this licensing strategy implemented by "TechGlobal Inc.," a fictional multinational corporation. TechGlobal has a clear license use policy categorizing employees into three main groups based on their job roles and technology needs: Basic Users, Advanced Users, and Power Users, each allocated a corresponding Microsoft 365 license type.
This tiered policy approach allows a company like TechGlobal to align license assignments with actual job requirements, reducing unnecessary expenditures on unneeded license features with a dynamic licensing strategy.
License pools offer a dynamic solution to the challenges of license over-provisioning and underutilization. This strategy not only simplifies the administrative aspect of license management but also ensures optimal utilization of resources by avoiding the pitfalls of over-provisioning or underutilization.
License pools in Microsoft 365 are centralized repositories of licenses that can be dynamically assigned and reassigned to users based on current needs, roles, and changes within the organization.
License Pools address several business needs and challenges, including:
Strategically monitoring inactive licenses and managing shared mailbox licenses are practices that move beyond administrative housekeeping. Be sure to monitor inactive plans to avoid reserving unneeded additional licenses. Once you identify inactive licenses, be sure to reassign licenses from employees who no longer need certain features or tools to others who may benefit from them.
This practice can also help identify opportunities for training or support, so employees can fully utilize the tools and stay up to date on the latest Microsoft 365 features.
E.g. Upon implementing a continuous license monitoring system, you might discover that a sizable percentage of your Copilot licenses are underutilized. Addressing this by reassigning or canceling these licenses and providing targeted training where needed could save your organization a significant amount annually.
Check out how to report on Consumed Portal Licenses.
Correctly managing licenses for shared mailboxes is an often-overlooked aspect of license optimization. While basic shared mailboxes do not require a license unless they exceed 50GB in size or utilize advanced features like archiving, tracking these can uncover opportunities to recover licenses erroneously assigned or no longer necessary. Regular reviews of shared mailbox usage can lead to substantial cost savings by reclaiming licenses for active use elsewhere.
According to our Microsoft 365 licensing data,
Make sure that your licensing strategy supports your organization's long-term business goals and aligns expenditure to actual usage patterns. Consider future growth, potential downsizing, or shifts in technology strategy. For example, if your organization is transitioning to a hybrid work model, you may want to negotiate more flexible licensing terms that accommodate both on-site and remote work needs.
You’ll also need to evaluate various licensing models, such as perpetual, subscription, or concurrent, and negotiate contracts based on your organization's specific usage patterns. This approach ensures you're not overspending for unused licenses and that you're adequately prepared for scaling up or down as necessary.
For instance, by analyzing usage data, you might find that a significant portion of your workforce only requires the basic features of Microsoft Office 365 E1 licenses for a portion of the year, while seasonal projects or contingent workers may necessitate temporary upgrades to E3 or E5 licenses during peak times. Renegotiating your agreement to allow for this flexibility can lead to significant savings, rather than maintaining a flat, higher-cost license tier year-round.
License lifecycle management allows IT teams to control the software inventory and maintain compliance.
Automating the management of users and their M365 licenses represents a strategic enhancement of IT operations, reducing manual oversight and minimizing errors. This automation supports a nimble workforce management strategy, ensuring that employees have access to necessary tools from day one and that resources are reclaimed and reallocated efficiently upon changes in employment status.
Automate processes like assigning or reclaiming licenses as users join, move within, or leave your organization. So, for example, when a new employee joins, the system can automatically assign them the standard license package based on their role. Conversely, the system should automatically reclaim and pool licenses for reassignment when an employee exits the organization. That way you're never paying for more licenses than you need.
Providing ongoing training and support is a strategic imperative that ensures end-users and IT teams are fully equipped to utilize M365 licenses within the bounds of compliance and efficiency. Ensure that your IT team and end-users are aware of the licensing agreements and the importance of compliance. Provide training on how to use software efficiently within licensing limitations.
You can also leverage support and training resources provided by your software vendors.
Don't overlook the native Microsoft 365 features like Viva Insights. These tools offer insights into usage patterns, helping to identify opportunities for license adjustments. Plus, Entra ID Group-based licensing automates license assignments, ensuring users have the necessary access without manual intervention.
However, third-party Microsoft 365 license management tools like CoreView offer advanced features for automating and managing licenses, providing deeper insights and reporting capabilities and enhancing the native capabilities of Microsoft 365 with:
Case Study: How a leading logistics company avoided over $1M in licensing costs.
Managing Microsoft 365 licenses well requires careful planning, monitoring, and implementing the right tools.
Tools like CoreView simplify the process by automating tasks like onboarding, offboarding and chargebacks and closing security gaps with granular role-based access control.
Plus, with actionable license reports, you get more data than what's available through Microsoft's native tools and take action based on licenses directly from the platform. This capability is particularly valuable when acting on the data involves complex scripts or manual processes. CoreView streamlines these actions—meaning no more wasted time and licenses or compliance risks.
See CoreView in action. Clickthrough this 3-minute interactive tour of M365 license management made easy.
